The all clear signs continued yesterday, lifting global equity markets. Asian and European bourses were also well in the black as the overall signs remain encouraging, luring investors to take on more risk. The S&P 500 has gained 2.1% for the week.The attention turns to the U.S. premarket as economic data hits the wires. The results, so far, are not good.
Retail sales came in much lower than expected, falling 1.2% for the month of May. The Briefing.com consensus was for a gain of 0.2%.
Volatile segments of the report were the main culprits for the decline. These included a 1.7% drop in automotive sales, a 9.3% fall in building materials, and a 3.3% drop in gasoline.
While the headline numbers were poor, the core figure was up 0.1% for the month, which includes sales minus auto dealers, building materials and supply firms, and gasoline stations. The net take away is that the trend is still up and given the normal volatility, next month's number could be higher.
Also out this morning is the University of Michigan sentiment at 9:55 a.m. ET and business inventories at 10:00 a.m. ET.
There was a slew of economic data out in China overnight, including consumer confidence and industrial production. Overall, the data was mixed. Industrial production came in at 16.5% and retail sales grew 15.7%. CPI data, which was leaked three days ago, came in hotter than expected, rising 3.1%.
Why Chinese economic data is important is due to the country's role in the global economic recovery. Market participants are looking for reassurance of a sustainable recovery for which China is the lynch pin. Some may argue the numbers are indicative the government has put off accelerating tightening measures, but we think that position is premature at this time. The inflation risk remains as evidenced by the CPI and money supply data today, meaning Beijing is still likely to be preemptive to stem off inflation.
Comments from Banco Santandar's (STD) Chairman that the crisis in Spain has been blown out of proportion and the Spanish bank would maintain its dividend are providing support to regional banks.
Shares of BP (BP) are benefiting from a relief rally, gaining over 7% in UK trading, recovering from rumors of a dividend cut (annual meeting is July 27) and potential bankruptcy.
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